At the Beginning of the Year the Exchange Rate Between

question 24

Multiple Choice

At the beginning of the year the exchange rate between the Brazilian real and the U.S. dollar was 2.2 reals per dollar. Over the year,Brazilian inflation was 12 percent and U.S. inflation was 4 percent. If purchasing power parity holds,at year-end the exchange rate should be approximately ________ dollars per real.

• A)2.3913
• B)0.4895
• C)2.8498
• D)0.4182
• E)0.3440

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Definitions:

Technology

The application of scientific knowledge for practical purposes, especially in industry, which drives innovation, efficiency, and productivity improvements.

Supply

Supply is the total amount of a good or service available for purchase at any given price level in a given market.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Demand

How much of a service or product buyers intend and are financially able to acquire at various price intervals during a designated period.